MARKET CLOSE: NZ shares fall ahead of earnings season

July
28 (BusinessDesk) - New Zealand stocks fell, snapping six
days of gains, as investors mulled stock valuations ahead of
earnings season. National carrier Air New Zealand dropped to
a three-month low, pacing the decline.

The NZX 50 Index
fell 7.126 points, or 0.1 percent, to 5187.142, from a
six-week high close on Friday. Within the index 19 stocks
fell, 21 rose and 10 were unchanged. Turnover was $82.3
million.

The benchmark index reached an all-time record
in the first-half of 2014 and has advanced 9.5 percent this
year, leading some investors to question whether the market
is fully priced and to seek validation for the high stock
prices as earnings season kicks into full-swing next month.
Air New Zealand dropped 2.6 percent to $1.87, its lowest
since March. The airline is due to report full-year earnings
next month, and Forsyth Barr analysts expect the company to
lift profit 29 percent.

"All eyes are very closely
focused on the earnings season, and particularly the
outlook," said Rickey Ward, New Zealand equity manager at
JBWere New Zealand Equities. "People are saying you're
trading on a multiple which we're not used to and, secondly
we need to earnings to come through to justify that multiple
we're not convinced the earnings will justify that
multiple."

Telecom fell 0.3 percent to $2.94, from the
highest level its been since it demerged with network
operator Chorus in November 2011. New Zealand's largest
telecommunications provider has gained some 28 percent this
year making it the second best performer on the benchmark
Index. As one of the larger companies on the bourse, Telecom
typically attracts interest from foreign investors seeking
exposure to New Zealand's markets. Fletcher Building, the
country's biggest listed company, fell 0.7 percent to $9.19.
Ryman Healthcare slipped 0.3 percent to $8.04.

JBWere's
Ward said an improving world economy was seeing some foreign
investors repatriating funds back to their economies while
local interest rate hikes had domestic investors eyeing
alternative asset classes with a potentially better yield
and some were raising funds ahead of upcoming initial public
offers.

Units in Fonterra
Shareholders' Fund were unchanged at $6.00. Tomorrow
Fonterra Cooperative Group's board meets and is largely
expected to cut its forecast 2015 milk price payout after a
38 percent drop in dairy prices this year. Economists at ASB
expect Fonterra to revise down its milk price payout for the
2014/15 season to about $6.20 per kilogram of milk solids,
from its initial estimate of $7/kgMS. The fund's units give
holders access to the dairy exporter's dividend stream.

Outside the benchmark index, Abano Healthcare, the
medical investor which earlier this year fended off a
hostile takeover from its biggest shareholder, rose 1.5
percent to $6.15 after it posted a 75 percent jump in
full-year profit to $6.1 million in the year ended May 31,
beating guidance and allowing it to maintain dividend
payments for a sixth straight year. Sales climbed 2 percent
to $274 million.

Dorchester Pacific rose 6.8 percent to
23.5 cents after it said it plans to offer $3 a share in
cash, shares and notes for Turners Auctions, valuing the
auction company at $82 million, after winning support from
chairman and major shareholder Michael Dossor. Turners
climbed 11 percent to $3.05, above the offer price.

Acurity Health Group soared 25 percent to $6.58, after
the three biggest shareholders launched a cash takeover bid,
offering $6.50 per share, for the 29 percent they don't own,
valuing the private hospital operator at $112.2 million,
saying the firm faces a big struggle lifting its flagship
Wellington hospital up to earthquake code.

"Balance sheets
are pretty healthy, so if you struggle to get organic growth
you tend to look for acquisitive growth, and I think it is
nothing more complicated than that." Ward said of the two
takeovers.

SLI Systems, the search engine software
developer, rose 6.9 percent to $1.39 after it said full-year
revenue missed its prospectus forecast, using its preferred
measure, although it will report a smaller loss because of
delays in building a sales team. Annualised recurring
revenue rose about 29 percent to $25 million in the 12
months ended June 30, compared to a forecast in last year's
offer documents of $25.9 million. The company is due to
report its audited earnings on Aug. 26.

The Wellington-based BusinessDesk team led by former Bloomberg Asian top editor Jonathan Underhill and Qantas Award-winning journalist and commentator Pattrick Smellie provides a daily news feed for a serious business audience.

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